-Thinking about what you just read, what strategic and financial plan would you put in place to help bring down inflation in America? There is no right or wrong answer. Just answer from your opinion and from what you read in the chapter.
siness that maximizes its owners’ wealth allocates its resources
efficiently, resulting in an efficient allocation of resources for society
as a whole. Owners, employees, customers, and anyone else who has a
stake in the business enterprise are all better off when its managers
make decisions that maximize the value of the firm.
Just as there may be alternative routes to a destination, there may be
alternative ways to maximize owners’ wealth. A strategy is a sense of
how to reach an objective such as maximizing wealth. And just as some
routes may get you where you are going faster, some strategies may be
better than others.
Suppose a firm has decided it has an advantage over its competitors
in marketing and distributing its products in the global market. The
firm’s strategy may be to expand into European market, followed by an
expansion into the Asian market. Once the firm has its strategy, it needs
a plan, in particular the strategic plan, which is the set of actions the
firm intends to use to follow its strategy.
The investment opportunities that enable the firm to follow its strat-
egy comprise the firm’s investment strategy. The firm may pursue its
strategy of expanding into European and Asian markets by either estab-
lishing itself or acquiring businesses already in these markets. This is
where capital budgeting analysis comes in: We evaluate the possible
investment opportunities to see which ones, if any, provide a return
greater than necessary for the investment’s risk. And let’s not forget the
investment in working capital, the resources the firm needs to support
its day-to-day operations.
Suppose as a result of evaluating whether to establish or acquire
businesses, our firm decides it is better—in terms of maximizing the
value of the firm—to acquire selected European businesses. The next
29-Strategy_FinancialPlan Page 933 Wednesday, April 30, 2003 12:19 PM
934 SELECTED TOPICS IN FINANCIAL MANAGEMENT
step is to figure out how it is going to pay for these acquisitions. The
financial managers must make sure that the firm has sufficient funds to
meet its operating needs, as well as its investment needs. This is where
the firm’s financing strategy enters the picture. Where should the funds
needed come from? What is the precise timing of the needs for funds?
To answer these questions, working capital management (in particular,
short-term financing) and the capital structure decision (the mix of long-
term sources of financing) enters the picture.
Strategy and Owners’ Wealth Maximization
Often firms conceptualize a strategy in terms of the consumers of the
firm’s goods and services. For example, you may have a strategy to
become the world’s leading producer of microcomputer chips by pro-
ducing the best quality chip or by producing chips at the lowest cost,
developing a cost (and price) advantage over your competitors. So your
focus is on product quality and cost. Is this strategy in conflict with
maximizing owners’ wealth? No.
To maximize owners’ wealth, we focus on the returns and risks of
future cash flows to the firm’s owners. And we look at a project’s net
present value when we make decisions regarding whether or not to
invest in it. A strategy of gaining a competitive or comparative advan-
tage is consistent with maximizing shareholder wealth. This is because
projects with positive net present value arise when the firm has a com-
petitive or comparative advantage over other firms.
Suppose a new piece of equipment is expected to generate a return
greater than what is expected for the project’s risk (its cost of capital).
But how can a firm create value simply by investing in a piece of equip-
ment? How can it maintain a competitive advantage? If investing in this
equipment can create value, wouldn’t the firm’s competitors also want
this equipment? Of course—if they could use it to create value, they
would surely be interested in it.
1 Lois Therrien, Patrick Oster, and Chuck Hawkins, “How Sweet It Isn’t At Nutra-
Sweet,” Business Week (December 14, 1992), p. 42.2 Monsanto sold its sweetener division in 2000.
29-Strategy_FinancialPlan Page 936 Wednesday, April 30, 2003 12:19 PM
Strategy and Financial Planning 937
Now suppose that the firm’s competitors face no barriers to buying the
equipment and exploiting its benefits. What will happen? The firm and its
competitors will compete for the equipment, bidding up its price. When
does it all end? When the net present value of the equipment is zero.
Top-Quality Papers with MyAssignmentWriters
Are you having trouble finishing your paper? Are you having trouble coming up with study subjects for a research paper? We aid students in obtaining the greatest top-notch academic writing services in accordance with the directions offered. Have your paper prepared by a certified specialist with a Ph.D., Bachelor's, or Master's degree in academic writing and several years of experience. All of our writers must pass a series of examinations to verify that they are skilled writers who can consistently produce high-quality papers within tight deadlines.
1000+ Master's, Bachelor's and Ph.d. Experts
Before we hire any of our writers, we make sure they have the skills and experience necessary to produce the greatest papers possible. Our authors have earned Bachelor's or Ph.D. degrees from reputed universities throughout the world. Our writers can produce papers in any discipline and on a wide range of topics. Dissertations, term papers, research papers, narrative essays, thesis papers, expository essays, and so on are examples. All of your orders must go through a rigorous editing process by our professional essay writers.
Affordable Essay Writing Services
We understand that students have limited financial resources. As a result, we always endeavor to supply our customers with only the best and most economical online college assignment help services. With all of our essay writing services, we offer a great degree of student-friendly pricing and professionalism. All of our returning and new customers receive substantial savings. Our paper writing services feature an easy-to-use interface and provide competent academic help. We are dedicated to assisting all students, regardless of their academic level, in any discipline. Place an order with a professional essay writer right now.
Timely delivery of Work
Are you on the verge of missing your paper's due date? Or did you devote a significant amount of time to undertaking comprehensive research and writing papers? You've come to the ideal site if you need a research paper completed in under three hours to meet a tight deadline. Our writers stick to a strict timetable to ensure that papers are supplied on time so that our editors may check them before they are sent to our customers. To fulfill our clients' deadlines, we diligently adhere to the delivery of assignments on time. As a result, you may rest assured that your assignment will be completed on time and within budget.
100% Original Papers
"Hello, can you write my essay completely from scratch?" We are committed to completing extensive research and creating papers from scratch in order to provide unique articles. Plagiarized paper writers are suspended in order to prevent future plagiarized works. All orders go through writing, editing, and proofreading stages to avoid plagiarism. All papers are supplied without any form of plagiarism. As a result, you can rest assured that any content that appears to be plagiarized or unoriginal will be rejected before it reaches your gateway.
24/7/365 Customer Assistance
We work hard to ensure that our consumers have a positive experience with our essay writing services. Our customer service representatives are available 24 hours a day, 7 days a week to assist consumers and make our paper writing services simple to use. Our knowledgeable customer service team is available to assist you at any moment, 24 hours a day. Please feel free to contact us with any questions you may have about your order, payment options, or order processing. Our customer service team is accessible 24 hours a day, 7 days a week to answer your questions. Please do not hesitate to contact us through our website or live chat.
If you ever find yourself buried by an ever-growing mound of schoolwork and need assistance, we are the people to call. We don't ask questions on our site; instead, we simply publish the project and let our expert homework helpers submit their bids. Choose your favorite writer after evaluating each proposal based on their writer's profile. Isn't that straightforward? Well, it is in our team's best interests to assist you in passing your exams. All you have to do now is pay for the assistance.
We are always willing to assist with any type of job. It makes no difference what time it is, where you are, or what language you speak. Our homework helpers come from many walks of life and speak a variety of languages, so simply post the task in a language you are comfortable with and let them submit their bids. So, whether you need Physics help, Biology aid, Chemistry help, Economics help, Finance help, English homework help, or Computer assignment help, you've come to the right place.
Since we launched, Assignmentsabc.com deserved the best online “college homework help status” thanks to our essay ordering, writing, and delivery process. We deliver nothing but excellence in our results. Our essay writing services include impeccable grammar, zero-plagiarism, proper structure, and conformance to guidelines.
Online Homework Writing Help
Online homework writing assistance is a relatively new notion that has garnered a lot of traction among students all around the world. It entails enlisting the assistance of persons who are experts in the field of creating such tasks and papers. This type of homework assistance is especially beneficial to students who find it difficult to articulate their thoughts in words and, as a result, may be unable to complete their work on time or receive decent grades as a result. You can, for example, hire a professional writer to help you with your thesis and achieve top grades.
Editing and Proofreading
At MyAssignmentWriters.com, we have a skilled writing and editing team that’s dedicated to creating, editing, and restructuring for all types of papers. Our online college homework help editing and proofreading team will check, paraphrase, and correct any grammar mistakes on your paper before submitting the final document to you.
At MyAssignmentWriters.com, we pride ourselves in having writers in almost all fields, even the most technical ones. You never have to worry about your paper being too technical for our certified online college homework help writers to handle. MyAssignmentWriter's team of writers can handle even the most complex writers. We will match your paper to the most competent writer that we believe will handle your paper the best way possible.